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                                                                    EXHIBIT 10.3


                         (CITY NATIONAL BANK LETTERHEAD)

                    Waiver of Default Under Credit Agreement


August 11, 1997


CERTIFIED MAIL
RETURN RECEIPT REQUESTED

Intervisual Books, Inc.
2716 Ocean Park Blvd., #2020
Santa Monica, CA  90405

Attention:  Gail A. Thornhill, Controller

         Re:  Waiver of Default Under Credit Agreement dated as of May 31, 1994,
              as amended ("Credit Agreement") executed between Intervisual
              Books, Inc., a California corporation ("Borrower") and City
              National Bank, a national banking association ("CNB")

Dear Ms. Thornhill:

         Section 5.5.1 of the Credit Agreement requires that Borrower maintain
Tangible Net Worth plus Subordinated Debt of not less than $3,100,000. Based on
Borrower's financial statement for the period ending June 30, 1997, Borrower has
not met this covenant.

         Section 5.5.4 of the Credit Agreement requires that Borrower maintain
Working of not less than $3,300,000. Based on Borrower's financial statement for
the period ending June 30, 1997, Borrower has not met this covenant.

         Under the terms of the Credit Agreement, Borrower's failure to comply
with or observe the provisions of the foregoing Section constitute an Event of
Default. You have requested that CNB waive the provisions of such Section in
connection with such Event of Default.

         Subject to the terms and conditions hereof, CNB hereby waives the
specific Events of Default set forth in the above paragraphs only for the
quarter ending June 30, 1997. This waiver shall be effective solely with respect
to the matters described above and shall not be deemed or construed to be a
waiver of any other term or condition of the Credit Agreement or any other term
or condition of any of the instruments or agreements referred to therein or
executed in connection therewith, or to prejudice any right or rights that CNB
may now have or may have in the future under or in connection with the Credit


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Gail A. Thornhill, Controller
Intervisual Books, Inc.
August 11, 1997
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Agreement or the instruments or agreements referred to therein or otherwise
executed in connection therewith with respect to any other Potential Events of
Default and Events of Default that may exist or arise. Except as expressly
waived herein, all of the terms and conditions of the Credit Agreement shall
remain unchanged and in full force and effect. Capitalized terms not defined
herein shall have the respective meanings given them in the Credit Agreement.

         This waiver shall become effective only upon receipt by CNB of
counterparts hereof acknowledged by you.

                                             Very truly yours,

                                             City National Bank,
                                             a national banking association

                                             By: /s/ Charles Solomon
                                                 ------------------------------
                                                 Charles Solomon, Senior Vice 
                                                 President/Manager


                                             By: /s/ Bruce E. Corey
                                                 ------------------------------
                                                 Bruce E. Corey, Vice President


ACKNOWLEDGED BY BORROWER:

Intervisual Books, Inc., a
California corporation

By: /s/ Gail A. Thornhill
    -------------------------------
    Gail A. Thornhill, Controller


Date: August 11, 1997